Running a business owned by the 401k

Can I use my Solo 401k to acquire a business? Can I run it myself?

Designed to be invested passively

• The 401k is designed for passive investing, to benefit and grow the 401k
• Using the 401k to invest in an active business will result in Unrelated Business Income Tax (UBIT) of 40% on the income from the active business
• The 401k will need to file a special tax form to report the income and pay the taxes
• Distributions from the 401k of these funds will also incur income tax

Consult with your CPA to fully understand all tax consequences if you are considering investing the 401k in an active business. 

You as a disqualified person

• You are a disqualified person with respect to the investments of the 401k
• If you invest in an active business with the 401k, you will not be allowed to run it yourself

Understanding prohibited transactions